The new markets are flourishing. Crowds are buying everything from Spanish oranges to ice-cream makers. But rice price inflation is running at 400-500 percent per annum. Despite the people's distribution service delivering about 50 percent of daily needs at hugely subsidised prices, up to 5 million people no longer earn enough to feed themselves. The problem is particularly acute in the heavily industrialized northeastern cities, where few factories are working and access to homegrown food or humanitarian aid is limited. A new rich class is emerging, and they are beginning to appropriate what little is available.
Freeing the farmers to go to the market is having an impact on productivity, despite inflation. However, the same is not true in the manufacturing sector, where the boost in demand is merely sucking in imports. Without development aid to kick-start the economy, the situation will not change. North Korea, once a developed country with 70 percent of the workforce in manufacturing, is experiencing a re-ruralization of the economy, with factory managers laying off industrial workers to grow food instead.
What can be done? It is in our interest to negotiate away the country's nuclear program -- though Pakistan, the source of the technology sold or traded to North Korea and others, seems to be mysteriously escaping global condemnation. It is clear that the program can be ended with a package of economic and political incentives. If we can set the North Koreans on the broad path to emulating China and Vietnam, the world will be a safer place. With a changing regime instead of regime change, we can move on to restart the human rights dialogue.
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